The Facebook Effect Is Available in Paperback Post a CommentThe Facebook Effect by David Kirkpatrick, New York: Simon and Schuster, 2010. Paperback edition, February 1, 2011.The saga of Facebook has all the classic elements of a great American success story: the quirky Harvard dropout forever dressed in tee-shirts and flip-flops, the gee-whiz technology that spawns phenomenal, exponential growth, and an antiestablishment mindset that leads the new enterprise to reject the usual route of finding venture capital and quickly moving to cash out via a highly lucrative IPO. In fact, Facebook is so hot right now Hollywood has already released a hit movie about it all. While not as entertaining as the Hollywood movie, David Kirkpatrick’s more factual The Facebook Effect, which is just out in paperback, provides a rich and detailed history of Mark Zuckerberg’s creation of Facebook from his Harvard dorm room in 2004 through early 2010, by which time over 400,000 people worldwide had joined Facebook. (As of January 2011 there were 600 million active users.)A long-time technology reporter for Fortune, Kirkpatrick first met Zuckerberg in 2006. They apparently hit it off. Kirkpatrick became interested in the larger ramifications of Facebook at a time when most businesses—indeed most adults—still considered it a site for college and high-school students. He wrote a piece for Fortune entitled “Why Facebook Matters” and he was the only journalist invited to cover the 2007 announcement of a new developers’ platform for the site. When Kirkpatrick approached Zuckerberg in 2008 about writing the book, the founder of Facebook replied “Go for it!” And indeed not only Zuckerberg but also many of the early employees of Facebook and its investors willingly gave their time to talk with Kirkpatrick as he researched the book. And, true to Zuckerberg’s own advocacy of transparency, neither he nor his organization asked for any special review of materials before the book was published.The result is for the most part a highly balanced and objective evaluation of the founding and early years of this social networking website, replete with tales of sophomoric shenanigans and poor judgment combined with idealistic fervor as well as intelligent design and programming skills. The Facebook Effect pulls together three main intertwined threads of Facebook’s early years: (1) the development of the user experience as the company added new features, (2) the amazing expansion of their user base from Harvard undergraduates to the world at large, and (3) the ever-growing investor interest in the value and valuation of the company, which still remains private. It was Zuckerberg’s single-minded focus on improving and expanding the user’s experience that led to both its increase in popularity and its astounding valuation, which currently is estimated to be $50B with revenue for the first three quarters of 2010 reported to be $1.2B, according to the Wall Street Journal. Zuckerberg himself has steadfastly remained the visionary, convinced that Facebook would change the world by continually enhancing the user experience. In the early days, he carried a leather-bound book in which he entered in meticulous 2-point size cursive handwriting his own detailed descriptions of ideas of what services Facebook would eventually offer. He called the book “The Book of Change” and added a quotation from Gandhi just below the title: “Be the change you want to see in the world.” Kirkpatrick writes: “Facebook is founded on a radical social premise—that an inevitable enveloping transparency will overtake modern life.” Zuckerbergbelieves that that he can change the amount of information people were willing to share. And he believes that the more sharing and transparency there is, the better the whole world would be. “A more transparent world,” he said, “creates a better governed and a fairer world,” he told Kirkpatrick.One can see his philosophy in action as features were rolled out over the first few years of Facebook. The developers added what they called “the wall,” where each user’s page displayed the user’s posts and all the comments that their friends had made. Any visitor to a user’s profile page could see all the comments left by everyone else. It was like writing a public email. In effect, everyone had their own bulletin board, as Kirkpatrick points out. The ability to post and archive photos, with tags identifying the people in the pictures, was added as a service. In both cases, the features encouraged people to spend more time on their Facebook pages. And in both cases, Kirkpatrick reports, Facebook founders described the users’ experience on Facebook as hypnotic. There was, they observed, the “Facebook trance.” People would addictively click through profiles, and click through pictures, learning more about the personal lives of their “friends,” and at the same time learning to share more and more information about their own lives. News Feed provides a good example of how Zuckerberg went about changing Facebook to more closely approximate his long-term goal for transparency while at the same time listening to and responding to his user base. News Feed delivered personalized information to each user about what their circle of friends had been doing recently. To achieve this, the Facebook team created an algorithm for tracking what each user changed in their profile or posted on their page. The algorithm then cross-matched those changes with analysis of what that user’s circle of friends were interested in and alerted various friends based on those common interests. Each user then automatically received stories and posts from their circle of friends, all arranged chronologically on their page. In effect, every Facebook user had an algorithmically customized home page. The problem was the customized page posted news from friends without the friends’ knowledge that it was being published.Zuckerberg believed News Feed was a major evolution of the product. Many within the company hated the idea. But the young founder persisted, working hard to convince products designers and programmers that this was an important step. Enthusiasm within the company gained steam and within a few months, News Feed was ready for launch. It was September 6, 2006, and cheap Korbel was on ice. But while the team was ready to celebrate, the users clearly were not. Users found that their Facebook home pages had been transformed into a long string of snippets telling them what their friends were doing. It also added notifications of any friends’ changes to their profiles of basic information. One user objected that he didn’t want everyone to know when he had updated his profile. The News Feed felt intrusive, “too creepy, too stalker-esque.” A group called “Students against Facebook News Feed” formed on Facebook itself and grew to thousands of members within hours. Three days later, there were 700,000 members in the group. In essence, the News Feeds feature revealed several aspects of how people actually used Facebook. In the first place, people were sensitive about their personal information and how broadly it was automatically published. News Feed was different in that it actually “pushed” information out from an individual’s page to those who were friends to that page. Also, as is common with any technology adoption, the users had adopted Facebook in a way that Zuckerberg and other Facebook employees hadn’t anticipated: They were not just adding their close friends and giving them access to their Facebook page. They were often competing in a certain way to show how many “friends” they actually had. In so doing they were exposing their personal information to casual friends and even mutual friends, and mutual friends of casual friends. Essentially they were collecting friends, not just connecting to existing friends. And when the changes they made to their Facebook page became data that was automatically managed and published by Facebook, they objected vehemently. They felt in a sense that they had lost ownership of their data.The News Feeds crisis also revealed was how the Facebook team, led by Zuckerberg, fostered their relationship with the user base. The team cared very deeply about users’ negative reactions to the new feature. Within the first twenty-four hours, Zuckerberg himself had blogged to Facebook users: “Calm down. Breathe. We hear you.” Within four days, Facebook had responded with additional privacy controls for individuals so that users could define what types of their personal information were published to which friends, and Zuckerberg himself wrote a blog explaining the new privacy rules and apologizing for not having them in place when News Feed was launched.It also redefined how users communicated. Kirkpatrick points out that Facebook had created a way for people to subscribe to information about other people, called “friends.” If you signed up to be someone’s friend, you automatically received updates about them. You didn’t have to wait until they sent something to you, as is the case with email. And it also enabled a way for large groups to form virally. Ironically enough, the first viral groups that formed were those who gathered en masse to object to the changes News Feed had itself introduced. Kirkpatrick writes that Zuckerberg’s biggest take-away from the whole News Feeds crisis was that users take a while to get used to change. But he never considered turning the feature off because if he believed the way information flowed through News Feed embodied the very core of what Facebook was meant to be. This went back to his master plan as outlined in “The Book of Change”: A set of incremental changes inexorably leading toward a fulfillment of Zuckerberg’s worldview. More sharing of personal information, more, as he is fond of calling it, “transparency.” But it turns out Zuckerberg’s plans encompasses more than changing the way people connected to each other. Facebook launched a platform that allowed developers to put their own applications on Facebook pages and make them available to all users for free. Zuckerberg’s aim is to create a standard software infrastructure that made it easier for others to build applications, but he wanted applications with a serious social component. He was disappointed to see that many applications were trivial, offering games or other ways to fritter away one’s time without creating social connections or supporting meaningful causes. But the overall goal was to make Facebook a “platform,” by which he really meant an operating system for running applications.The free developers’ platform, as Kirkpatrick points out, was an effort to supplant Microsoft, who for two decades had required any developer who was going to have their product run on a PC to work within the Windows environment. Later Facebook would add another platform feature, Connect, expanding the ways users can log on to other websites using their Facebook data. But this feature also has a highly commercial aspect to it: It enables other businesses to gather information users have entered on Facebook. So while each feature in this expansion plan increases the amount of information users would share with their friends, later additions have distinctly commercial advantages for Facebook’s business partners to exploit that data. The Facebook Effect devotes a chapter to privacy, an issue that has plagued Facebook from the start, first from the users themselves and then from governments around the world. (This past week Germany took Facebook to court over user privacy issues.) Facebook’s response has generally been to provide users with more controls, although every once in a while it has been forced to redesign a feature when it seemed to divulge too much information too broadly. As the website delves deeper and deeper into offering marketing services to companies, the privacy issues have gotten more serious. One such feature was “Beacon,” which published information to a user's circle of friends’ about which products or services that user had purchased from commercial websites. “In each case,” Kirkpatrick observes, “the company pushed its users a bit too hard to expose their data and subsequently had to retreat.”Kirkpatrick chronicles two other ways in which Facebook expanded: the audience grew both in sheer numbers and across age groups and geography, and the amount of money companies and individuals were willing to invest mushroomed as well. Demographically what began as Harvard website in early 2004 expanded rapidly to include first Ivy League colleges and then all US colleges. Facebook next reached out to US high-school populations, even as it started connecting to other countries. And it went to adults through their workplaces, although here it was slow to take root because it was still perceived to be an adolescent website. Deals for advertising and partnerships blossomed even as Zuckerberg sidestepped the usual VC route of the fast-track to IPO. When Kirkpatrick takes on the advertising business model, he loses his usual objective and balanced perspective however, overstating how revolutionary he believes the Facebook business model is: “Facebook now sits squarely at the center of a fundamental realignment of capitalism,” Kirkpatrick proclaims. The reader might well ask just what exactly Kirkpatrick means by this. What he seems to mean is that the fundamentals of marketing, switching from direct advertising to getting people to be more interested in their products in subtler ways. He believes that people have more control as consumers because they can create a Facebook page or group that is either for or against a product or a company. The companies have no way to control those conversations. I’m not sure how this differs from pre-Facebook days or why this is changing the fundamentals of capitalism myself. Nor does the fact that Facebook offers the most targeted marketing ever available seem to change the nature of capitalism as a whole. It’s doubtful that it will even turn out to be a disruptive technology. Rather it seems to be a refinement on the Google advertising model and a new chapter in platform technologies like Microsoft. Companies are still pushing their products. Consumers are still buying their products and being swayed by popularity and public relations efforts. Still, this is a minor quibble about what is generally a thoroughly readable and informative chronicle of Facebook, of the development of the website and its business model, of the major players in the company’s early history, and of what its very young founder believes and where he wants to go next. Yet the real question that remains is whether there is an inherent conflict between Facebook as a vehicle for friends to share personal information on the one hand, and Facebook as a business model for highly targeted marketing that takes advantage of all this sharing on the other hand. Transparency, in the end, may simply end up helping businesses sell more products, whether it's more Mazdas or more Tostitos or more iPhones.